Our retail research team has created 3 stock lists, namely Growth, Value and Yield.
|The Growth List comprises of small-mid capitalisation companies with business catalysts which will potentially grow their earnings in the near future. The Growth portfolio would be suitable for investors looking for higher returns and are willing to tolerate the risk of higher short-term volatility of stock prices.|
|The Value List focuses on companies which are undervalued based on their share prices as compared to the company fundamentals. It would be suitable for conservative investors who prefer price stability and have a longer investment horizon.|
|The Yield List comprises of stocks that provide consistent dividend pay-out. It would be suitable for investors whose primary focus is to gain regular dividend income from their investments.|
May Market Overview
The Singapore market (STI) slumped 8.3% in May '19 as investors avoided risk assets on fears that the escalating US-China trade conflict would slow down global growth and corporate earnings.
Not unexpectedly, the impact was felt by the Singapore economy, which grew a pedestrian 1.2% in 1Q19, a notch lower than the initial estimate of 1.3% and below market expectations of 1.4%, largely dragged by slowdown in the global electronics cycle.
Ytd, the STI rose 1.6%, giving a total return (including dividends) of 3.7%. On an equal weighted basis, the average gain of the 30 constituent stocks was 5.6% with nine stocks in the red, while nine (down from 17 in Apr) chalked double digit returns, led by Thai Beverage (+35.6%).
Against this backdrop, Market Insight’s Growth, Value, Yield (GVY) basket of stocks managed to achieve a respectable average total return of 7.7%, beating the benchmark index by 2.1ppt.
Growth List +10.7% YTD
The Growth portfolio was partly boosted by our switching of ST Engineering from Value to Growth basket, as its earnings prospects should be underpinned by record order book of $14.1b. Moreover, its 2H19 outlook will also see greater contribution from the full integration of MRA Systems acquisition plus a number of project milestones. MKE has a Buy with TP of $4.30.
Value List +4.8% YTD
The Value portfolio was weighed by poor performance of Japfa on weaker-than-expected 1Q19 results, crimped by combination of higher raw material costs and working capital requirements. In addition, fears of the African swine flu outbreak in Vietnam contaminating its swine stock rattled investor sentiment.
However, MKE still retains its Buy call with a lower TP of $0.93 as tight biosecurity in its Vietnam industrialised swine farms should provide some comfort and Indonesian broiler prices have rebounded 20% m/m in Apr, which should allay market concerns of weak ASPs in the prior two months.
During the month, we added Uni-Asia to the Value basket given its undemanding valuation of 5.4x FY19e P/E and 0.3x P/B, supported by ~6% yield. Following its recent placement exercise, the group intends to undertake more property and hotel projects in HK and Japan. Meanwhile, book value of its ship investments is at depressed levels after several years of provisions, thus limiting further write-offs.
Yield List +7.4% YTD
Last month’s performance was driven by Manulife US REIT after analysts reaffirmed their positive view after site visits to its four US properties. MKE reiterate its Buy rating with TP of US$1.00 and likes the US office landlord for its DPU visibility, supported by stable income growth and low leasing risks.
We replaced UMS with Valuetronics following the former’s disappointing 1Q19 results that were chipped by weaker customer demand, as well as interim dividend payout, which was halved. We favour Valuetronics for its strong net cash position (>60% of market cap), undemanding valuation of 8x FY20e P/E and sustainable yield of 7%.
Note: * Priced in USD
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This document is being distributed for general information only and it does not constitute an offer, recommendation or solicitation to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. This document is for general evaluation only, it does not take into account the specific investment objectives, financial situation or particular needs of any particular person or class of persons and it has not been prepared for any particular person or class of persons.
Opinions, projections and estimates are solely those of Maybank Kim Eng Securities at the date of this document and subject to change without notice. Past performance is not indicative of future results and no representation or warranty is made regarding future performance. Any forecast contained herein as to likely future movements in rates or prices or likely future events or occurrences constitutes an opinion only and is not indicative of actual future movements in rates or prices or actual future events or occurrences (as the case may be).
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